The US Department of Justice plans to sell $56 million worth of cryptocurrency that was seized in connection with the case against the BitConnect Ponzi scheme.
In a statement issued on Tuesday, the Department of Justice said it will sell the confiscated cryptocurrency and keep the proceeds in US dollars so that the funds can be used to compensate BitConnect victims. The US government currently holds $56 million in cryptocurrency wallets, noting that the amount of compensation for those affected by the BitConnect scam will depend on “a future court decision regarding the return of the funds in the form of a judgment.”
“This liquidation is the largest cryptocurrency fraud detection in the United States to date,” the Department of Justice said, noting that BitConnect is the largest reported cryptocurrency fraud scheme in the United States in connection with criminal offenses.
It is unclear how the US government will deal with the sale of digital currencies worth millions of dollars, or what impact this will have on the price of large assets such as Bitcoin (BTC) and Ether (ETH). According to Cointelegraph Markets Pro, BTC is hovering around $60,000 after dropping nearly 7% on Tuesday, while ETH is at $4,254 at press time after a similar drop.
The players behind BitConnect were responsible for placing fake unregistered securities that earned them $2 billion. The project’s former director and promoter, Glenn Arcaro, pleaded guilty to fraud in September and was ordered to pay $24 million to BitConnect victims.
The Securities and Exchange Commission, or SEC, has also filed charges against Arcaro and BitConnect founder Satish Kumbhani, whose whereabouts were unknown at the time of publication. Settlement with the Securities and Exchange Commission (SEC) for others implicated in the Ponzi scheme is still pending, but several people face prison terms or severe financial penalties for their role in the alleged investor fraud.
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BitConnect was set up in 2017 and has pushed its promoters to lure investors with promises of high returns, urging them to use BTC as collateral that they can borrow and exchange for the platform’s native token. The lending platform shut down in 2018 after government requests were halted and rejected, meaning many investors were unable to buy back the cryptocurrency.